2016 (3) TMI 380 - AT - Central Excise

Customs duty not applicable on fresh cut flowers grown in Domestic Tariff Area by Export Oriented Unit.

The Tribunal held that no customs duty is chargeable on fresh cut flowers grown and cleared in the Domestic Tariff Area (DTA) by a 100% Export Oriented ... 100% EOU - sale of goods in Domestic Tariff Area (DTA) without following the guidelines - Customs duty is chargeable on fresh cut flowers grown and cleared by the appellant in DTA in terms of Notification No. 126/94-Cus., dated 3-6-1994 % or otherwise - Held that:- As per this provisions a clear distinction between excisable goods and non-excisable goods were made. When excisable goods are manufactured then the excise duty in terms of Section 3 of Central Excises and Salt Act, 1944 are required to be paid which is otherwise equal to the Customs duty leviable on such article. In case of non-excisable goods, no excise duty or Customs duty on such non-excisable goods are required to be paid. Only customs duty equal to amount leviable on imported goods used for production, manufacture or packaging of such article are required to be paid. In the present case the final product is Cut Flowers which is sold in DTA market. The said Cut Flowers are not excisable, firstly there is no question of any payment of excise duty or customs duty on Cut Flowers. If at all any duty liability is there it should be on the imported goods which is used for production, manufacture or packaging of cut flowers. In the instant case, it is not case of Revenue that the appellant have used any imported material for growing or packaging of cut flowers. Therefore there is no question of any demand of customs duty. In any case, the demand was confirmed by the original adjudicating authority in terms of Notification No. 126/94-Cus. on the cut flowers as discussed above. Cut flower being non-excisable goods, neither any excise duty nor any customs duty is required to be paid. We are of the considered view that demand of duty on the Cut Flowers grown/produced in India and cleared in DTA is not chargeable, therefore the impugned order is sustained as cut flowers cleared by 100% EOU in DTA does not attract any duty. - Decided in favour of assessee Issues Involved:1. Whether customs duty is chargeable on fresh cut flowers grown and cleared by the appellant in Domestic Tariff Area (DTA) in terms of Notification No. 126/94-Cus., dated 3-6-1994.Detailed Analysis:Background:The respondent, a 100% Export Oriented Unit (EOU), engaged in growing fresh flowers and clearing them in the Domestic Tariff Area (DTA), was alleged to have not paid the appropriate duty on these products. The Adjudicating Authority confirmed duty demands and imposed penalties. The Commissioner (Appeals) set aside these orders, leading to the Revenue's appeal.Revenue's Argument:The Revenue argued that the Adjudicating Authority rightly confirmed the demand in terms of Notification No. 126/94-Cus., which mandates that customs duty is payable on articles manufactured by a 100% EOU if they are not exported. The Revenue cited judgments in *CCE, Pune v. Horizon Flora India Ltd.* and *L.R. Brothers Indo Flora Ltd. v. CC, Meerut* to support their claim that customs duty should be charged on the cut flowers sold in DTA.Respondent's Argument:The respondent contended that the final product, fresh cut flowers, is non-excisable and does not find any entry in the Central Excise Tariff. They argued that Notification No. 126/94-Cus. does not empower the department to demand duty on non-excisable final products but only on the imported inputs used for their production. They further asserted that no imported inputs were used in the production of the cut flowers, making the demand for duty unsustainable. The respondent cited judgments in *Commissioner of C. Ex., Pune v. Abbound Bio-Agri Technologies Ltd.*, *Commissioner of Central Excise, Pune-I v. Soex Flora P. Ltd.*, and *Commissioner of Central Excise, Pune-I v. Neha International Ltd.* to support their position.Tribunal's Analysis:The Tribunal examined the relevant provisions of Notification No. 126/94-Cus., which distinguishes between excisable and non-excisable goods. For non-excisable goods, customs duty is only payable on the imported goods used for their production, not on the final product itself. The Tribunal noted that in this case, the final product (cut flowers) is non-excisable, and there was no evidence that imported inputs were used in their production. Therefore, no customs duty was payable on the cut flowers cleared in DTA.Supporting Judgments:1. Abbound Bio-Agri Technologies Ltd.: The Tribunal held that duty demand is on the imported inputs, not on the non-excisable articles produced.2. Soex Flora P. Ltd.: The Tribunal reiterated that when goods are non-excisable, demand under the Central Excise Act is not sustainable.3. Neha International Ltd.: The Tribunal confirmed that only excise duty under Section 3 of the Central Excise Act is payable on DTA clearances by 100% EOUs, and no customs duty is chargeable on non-excisable goods.Distinguishing Revenue's Cited Judgments:The Tribunal distinguished the judgments cited by the Revenue, noting that they dealt with customs duty on imported inputs used in non-excisable goods, whereas the present case involved a demand for duty on the non-excisable final product itself.Conclusion:The Tribunal concluded that no duty is chargeable on the cut flowers grown and cleared in DTA by the respondent. The impugned order of the Commissioner (Appeals) was sustained, and the Revenue's appeals were dismissed.